Novartis is among the biggest investors in gene therapy. (Wikimedia Commons/Andrew/Flickr)

Ever since 2012 when Novartis invested in personalized CAR-T cancer treatments being developed at the University of Pennsylvania, analysts have pondered a difficult question: How can pharma companies profit from curing patients?

Now Novartis’s CAR-T, Kymriah, is on the market, as is a similar treatment from Gilead Sciences called Yescarta. Last year also ushered in Luxturna from Spark Therapeutics, a gene therapy to treat a rare form of inherited blindness.

This week, Goldman Sachs resurrected that burning business question.

The FDA-approved gene therapies are designed to be one-time cures, and for many patients they've been just that. Many more gene therapies are moving through biopharma pipelines. And that presents a challenge to the industry, which of course relies on the cash and profits their products spawn over time, said Goldman Sachs analyst Salveen Richter in a note to investors earlier this week.

"While this proposition carries tremendous value for patients and society, it could represent a challenge for genome medicine developers looking for sustained cash flow," Richter wrote.

Richter offered up Gilead as example of a company that has already suffered financially from curing patients. The success of the company’s hepatitis C franchise, which includes the now-former megablockbusters Sovaldi and Harvoni, “has gradually exhausted the available pool of treatable patients,” he points out. That shrinking customer base, coupled with tough competition from AbbVie’s AbbVie's Mavyret, forced Gilead to forecast hep C sales for this year of no more than $4 billion—falling short of analysts’ estimates of $5 billion. Sovaldi and Harvoni sales peaked at $19.1 billion in 2015.

But Richter sees some routes to sustainable gene therapy sales. Companies could address large markets like hemophilia, worth as much as $10 billion and growing about 6% a year, he said. Spark is working on gene therapies to treat hemophilia A and B, the latter of which is partnered with Pfizer. In December the companies announced that patients in a phase 1/2 trial saw their symptoms diminish significantly for up to a year.

And then there's the chance to constantly expand their portfolios, Richter said, citing as an example the “hundreds of inherited retinal diseases” that exist. Spark’s Luxturna is now approved to treat fewer than 2,000 patients with a specific genetic mutation, but the company is working on gene therapies to treat at least two other inherited eye disorders.

In its report, Goldman Sachs highlighted four “genome medicine disrupters and innovators” well positioned to find a business model in cures: BioMarin, Bluebird, CRISPR Therapeutics and AveXis, the latter of which was bought by Novartis earlier this week for $8.7 billion. AveXis is in phase 3 trials with a gene therapy for spinal muscular atrophy—an asset that Novartis valued at an 88% premium over AveXis’s closing price prior to the offer.

Even though Bluebird and CRISPR have seen their stocks double over the past year, Richter wrote, “we continue to see upside for the best positioned companies,” because of a number of key events coming up. One of those, of course, is the potential for even more acquisitions. Richter pointed to Gilead’s $12 billion purchase of Kite and Celgene’s $9 billion buyout of Juno Therapeutics—both CAR-T deals—as prime examples of just how much pipeline-hungry companies have been willing to pay to get into gene therapy.

Cancer poses less of a business-model conundrum than many of the other diseases pursued by gene therapy developers, Richter suggested, because the “incident pool remains stable,” posing “less risk to the sustainability of a franchise." That portends more M&A activity to come in oncology, he said.

Overall, Goldman Sachs is optimistic that gene therapy developers and acquirers will work out the business-model challenge. In the new report, they argued that investors have not yet fully recognized the potential for gene-based treatments to “create new profit pools and disrupt the existing $1 [trillion] annual biopharmaceutical market.” Genome medicine, they predicted, will create a total addressable market of $5 trillion, “with the potential to expand further.”